When UK companies must use IFRS

The only UK companies the Companies Act forces onto IFRS are parents whose securities are admitted to trading on a UK regulated market at the balance sheet date, and only for their group accounts. Every other company may choose UK adopted IFRS for its individual or group accounts, except charities, which cannot. Once chosen, IFRS must be kept unless there is a relevant change of circumstance or five years have passed since the last voluntary switch away.

Who is legally required to use IFRS?

Section 403(1) of the Companies Act 2006 says the group accounts of a parent company whose securities are, on its balance sheet date, admitted to trading on a UK regulated market must be prepared under UK adopted international accounting standards. Section 1173 defines a UK regulated market by reference to the UK version of the Markets in Financial Instruments Regulation.

Three points follow from the wording:

• It applies to group accounts only. The same parent may prepare its own individual accounts under FRS 101 or FRS 102.
• It is tested at the balance sheet date. A group admitted to trading part way through a year must use IFRS for that year’s group accounts. A group whose securities have stopped being admitted to trading before its year end is no longer caught by section 403(1) for that year, and ceasing to be admitted is a relevant change of circumstance under section 403(5)(b) that allows a return to UK GAAP.

ICAEW also notes that AIM companies are required to use UK adopted IFRS in their consolidated accounts, while remaining free to choose between IFRS and UK GAAP for their individual accounts.

For issuers, the FCA’s Disclosure Guidance and Transparency Rules add a reporting timetable. DTR 4.1.3 requires an issuer to publish its annual financial report within four months of its year end, and DTR 4.1.6 requires consolidated accounts within it to be prepared under UK adopted IFRS.

Which companies can choose IFRS?

Section 395(1) lets any company prepare its individual accounts either as Companies Act accounts or as IAS individual accounts under UK adopted international accounting standards. Section 403(2) gives the same choice for group accounts of companies not caught by section 403(1). ICAEW summarises the position as almost all companies having a choice between UK GAAP and UK adopted IFRS.

The exception is charities. Section 395(2) requires a charitable company’s individual accounts to be Companies Act accounts, and section 403(3) does the same for group accounts of a charitable parent. A charitable company therefore uses UK GAAP, and in practice that means FRS 102, because section 384B(1)(f) also excludes charities from the micro entity regime.

FRS 100 sits on top of the Act. Paragraph 4 applies only to accounts that are not required to be prepared under adopted IFRS, and lists FRS 105, FRS 102, adopted IFRS and, for a qualifying group member, FRS 101 as the options. The full decision path is in FRS 100: which UK GAAP framework applies.

What does UK adopted IFRS actually mean?

Section 474(1) defines UK adopted international accounting standards as those adopted for use in the UK under the International Accounting Standards and European Public Limited Liability Company (Amendment etc.) (EU Exit) Regulations 2019. GOV.UK explains that at the end of the Brexit transition period this set consisted of all standards then adopted in the EU, and that new or amended IASB standards are added once adopted by the UK Endorsement Board. The FRC reported that the Board received its delegated statutory powers on 21 May 2021.

The consequence is that an IASB effective date is not automatically a UK one. IFRS 18, which replaces IAS 1, has an IASB effective date of periods beginning on or after 1 January 2027; a UK company applies it as part of UK adopted IFRS only once it has been adopted for UK use.

Can a company that chooses IFRS change its mind?

Not freely. Under section 395(3), once directors prepare IAS individual accounts, later individual accounts must also be IAS accounts unless there is a relevant change of circumstance. Section 395(4) lists them:

• the company becomes a subsidiary of an undertaking that does not prepare IAS individual accounts;
• the company ceases to be a subsidiary;
• the company ceases to have securities admitted to trading on a UK regulated market; or
• its parent ceases to have securities admitted to trading on a UK regulated market.

Without one of those, section 395(4A) still allows a move back to Companies Act accounts for any reason, provided the directors have not made such a voluntary change in the five years before the first day of that financial year. Section 403(4) to (5A) apply equivalent rules to group accounts. If the company later returns to IFRS, section 395(5) restarts the clock as if it were a new first IAS year.

Moving back to UK GAAP is itself a first time adoption, handled by Section 35 of FRS 102 or by FRS 101. See transition to FRS 102.

Does every company in a group have to use the same framework?

Section 407(1) requires the directors of a parent to secure that the individual accounts of the parent and each subsidiary use the same financial reporting framework, unless in their opinion there are good reasons not to. Section 407(5) disapplies this for the parent itself where the directors prepare IAS group accounts and IAS individual accounts, so a listed parent can use IFRS throughout while its subsidiaries all use FRS 101 or FRS 102. The rule does not apply if no group accounts are prepared (section 407(2)), and charities in a group need not follow the non charitable members (section 407(4)).

Is there a middle way for subsidiaries?

Yes. FRS 101 lets a qualifying entity, broadly a member of a group whose parent publishes consolidated accounts including it, apply the recognition and measurement rules of adopted IFRS in its individual accounts with reduced disclosures (paragraph 5). Paragraph 4A confirms these are Companies Act accounts, not IAS accounts, so choosing FRS 101 does not trigger the IFRS lock in under section 395(3). FRS 101 cannot be used for consolidated accounts (paragraph 3).

That makes FRS 101 the usual choice for UK subsidiaries of IFRS reporting groups: the numbers match the group reporting pack, but the notes are shorter. Subsidiaries of FRS 102 groups usually stay on FRS 102 and use the qualifying entity exemptions in paragraphs 1.8 to 1.12. The measurement differences that drive these choices are set out in IFRS vs FRS 102: the main differences.

How does this play out for a growing group?

Illustration only. A family owned group with a 31 December year end prepares FRS 102 group accounts. In September 2027 its shares are admitted to trading on a UK regulated market.

• Its group accounts for the year to 31 December 2027 must be IAS group accounts under section 403(1), because its shares are admitted to trading on its balance sheet date.
• The parent’s individual accounts may stay on FRS 102 or move to FRS 101 or IAS individual accounts. If the parent chooses IAS for both its group and individual accounts, section 407(5) means its subsidiaries are not pushed onto IAS accounts as a result.
• Its subsidiaries can move to FRS 101 so that their figures follow IFRS measurement without full IFRS notes.
• The annual financial report for 2027 must be published by 30 April 2028 under DTR 4.1.3.

Common mistakes include assuming AIM companies fall outside IFRS requirements because AIM is not named in section 403(1), letting a subsidiary adopt IAS accounts by default and then finding it cannot easily leave, and treating IASB effective dates as automatic in the UK.

Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

Related Accountapedia entries

• Can a company move from IFRS back to FRS 102
• UK adopted international accounting standards
• The UK Endorsement Board and new IFRSs
• FRS 101: the reduced disclosure framework
• Adopting IFRS for the first time: IFRS 1
• Who must sign a company tax return

Sources

• legislation.gov.uk: Act 2006 c. 46, section 403
• legislation.gov.uk: Act 2006 c. 46, section 1173
• ICAEW: Overview
• FCA Handbook: 1
• legislation.gov.uk: Act 2006 c. 46, section 395
• legislation.gov.uk: Act 2006 c. 46, section 384B
• Financial Reporting Council: FRS 100 September 2024
• legislation.gov.uk: Act 2006 c. 46, section 474
• GOV.UK: Uk endorsement board ukeb
• Financial Reporting Council: Uk endorsement board receives delegated powers

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.